What options are there for debt relief? So you’re in debt and looking for a way out before the creditors come for everything you’ve got. As part of the modern capitalist system some people will win and others will lose. They say that a poor American is a ‘temporarily embarrassed millionaire’. Even President Donald Trump, a billionaire today, has been bankrupted in the past. That shows that you are in a bit of a mess now and with a little help may well completely turn your fortunes around one day.

Debt relief plans

There are three debt relief plans that you can access through debt relief companies to avoid going bankrupt. Most will damage your credit score for a short time, but nothing like the amount of time you will suffer for going bankrupt.

Debt settlement is where you hire a debt relief firm to negotiate a lower final debt with your creditors. While this takes place you make no payments to the creditors but set aside a lot of money in a savings account to pay a final agreed fee. While you are not paying the repayments your credit score will be marked as a defaulted or late payment, and it could be six years after the debt settlement before you get credit. There is also a risk that no negotiated settlement will be agreed.

Debt consolidation is where you will take out a loan from a debt relief company to pay off all of your debts in one hit. They will often negotiate the final sum to be repaid as well. This will be a lot cheaper in the short term than dealing with all your creditors individually yourself. This will be less expensive if you have a good credit score, though in most cases people will have to pay far higher interest rates as they will have a poor credit history and are thereby deemed to be at greater risk of default.

The approach with least harm to your credit score is the Debt Management Program. The debt relief company will take payments from you and forward them to all of the creditors without spending time negotiating a lower fee. This means that you won’t harm your credit score through default and may well be a faster way out of a lesser debt than the two above.


Bankruptcy costs a lot of money and may include losing most of the assets that you hold dear in your life such as your home. In most cases bankruptcy really should only be a measure of last resort and you should only consider this if you are advised to by a debt relief company, financial advisor or a lawyer. It is far better to get help before you are in that much trouble than to go through the pressure and pain of bankruptcy proceedings. If you’re struggling right now but can just about make ends meet you should consider one of the three options we describe above – get help while you can!

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